I'm here to discuss risk taking. R-squared is for Ranting and Raving, R&R, as well as some more technical topics

Wednesday, October 23, 2013

Oregon Taxpayers, Please Meet Michael Dell

Should public universities go private? It's a hot topic in Oregon. Three of their seven public universities "go private" next year.

Of course I'm in favor of most anything going private, but let's consider this from the view of the Oregon taxpayer, the likely loser here.

A public university going private sounds an awful lot like Michael Dell leading a private equity buyout of the public company he founded. Substitute faculty and administration for buyout firm and Michael Dell. Substitute Oregon for the selling shareholders.

Since no one has asked, I will offer my "fairness opinion" on this buyout transaction: Good luck making this fair. The state of Oregon contributed land, taxing authority, governance, pension backstops, and I don't know what else, to this enterprise. Now, the new management team wants to take all that in the interests of better education, when the only obvious plans are more generous salaries and benefits, combined with higher top-line tuition. That sounds great already.

How about this: Let the universities go private. Let them raise capital to fund an endowment, (remember a hedge fund that prints diplomas doesn't pay taxes!) Buy the assets from the state university system: dorms, lecture halls, football stadiums...don't forget the goodwill. Also, make sure they can fund healthcare and retirement benefits without using state resources.

Sounds impossible right? I guess that's why those who run the University of Phoenix aren't running around buying up universities, huh?

About Me

Since completing my PhD in economics at the University of Chicago, I have worked at financial firms ranging from the insanely large (JP Morgan) to the ridiculously small (my current venture has one employee!) with stops in between investing for McKinsey & Company, and Silver Creek Capital Management. I have served on company boards, both public and private.
You can reach me at marc@riskrsquared.com